Once I've used my savings and the Government bonus to buy my first home can I continue paying into my Lifetime Isa to build up a new bonus?

I've read that the Lifetime Isa can also be used to save for later life, but if I've already used the Government bonus to buy a home can I still do this?

Rachel Jones, Leeds

Leah Milner replies: "Yes you can. It's brilliant that you are planning ahead and thinking about your long-term future as well as your short-term goal of getting on the property ladder.

"Even though there is nothing on the Government website about this scenario, the Treasury has confirmed that you can continue saving into a Lifetime Isa after you've made use of the bonus to buy your first home.

"But - you'll need to be willing to keep your savings locked away until you reach 60 - otherwise you will have to pay a hefty withdrawal penalty.

"You've already put in your first £4,000, so let's say you save for another four years putting in the maximum £4,000 annual contribution every time.

"In four year's time when you are 39 you'll have paid in a total of £20,000 and earned a Government bonus of £5,000 giving you £25,000 to put towards your deposit, plus any interest that has built up.

"When you make use of this money make sure that you tell your Lifetime Isa provider and the solicitor handling your house purchase that you want to keep your Isa open after withdrawing the cash.

"This is just in case your timetable slips as you won't be able to open a new Lifetime Isa after you reach 40. But, don't worry you'll still be able to transfer it to a new provider if there's a better interest rate on offer.

"So let's say that you are 40 by the time you are able to start saving again after all the expenses of moving into a new property, you'll still be able to pay into your Lifetime Isa for the next 10 years.

"If you make use of the full yearly allowance you'll put aside a further £40,000 and earn a Government top-up of £10,000 by the time you reach 50.

Lifetime Isas: Need to know

YOU can open a Lifetime Isa if you are between 18 and 39 to save towards your first home or for later life.

You can pay in a maximum of £4,000 every year and earn a top-up from the Government of £1,000.

The maximum bonus you could earn is £33,000 if you save until you are 50.

Once you turn 50 you can no longer pay into your Lifetime Isa but your savings will still earn interest.

You can only acess your money to buy your first home or when you reach 60, otherwise there's a penalty.

Any money you take out before you are 60 will be hit with a 25 per cent charge.

When you're 60 you can withdraw the money from your Lifetime Isa tax-free.

Skipton Building Society is the only provider currently offering a cash Lifetime Isa.

If you are willing to take investment risk, there are many providers offering the stocks and shares version including Nutmeg, Hargreaves Lansdown, The Share Centre, Moneybox, AJ Bell, OneFamily.

Unless you are self-employed AND a basic rate tax payer, a pension is likely to be a better option for retirement saving than a Lifetime Isa because of the tax-breaks and the contribution from your employer.

"Once you turn 50 you can no longer pay into a Lifetime Isa but you will still earn interest on your savings, or if you have gone for the stocks and shares version, you'll still receive any returns that you are due.

"But you won't be able to get your hands on the money before your 60th birthday unless you pay a nasty penalty of 25 per cent on whatever you withdraw, so you'll lose more than just the bonus."

How does the withdrawal penalty work?

"Say, for example, you pay in £4,000 and get a 25 per cent bonus of £1,000, you'll have £5,000 in your Lifetime Isa.

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"But if you wanted to withdraw £5,000 you'll be charged a 25 per cent penalty or £1,250. This means you would get back just £3,750, which is less than you originally paid in.

"The only exception to this is if you are terminally ill with less than 12 months to live, in which case you could access your money without a penalty.

"The reason for these steep charges is that the Government wants to encourage people to save for the long term."

Should you use a Lifetime Isa for pension saving?

THE Lifetime Isa was introduced to encourage Brits to think about saving for their future.

Yet for most people, saving into a traditional pension plan is still the way to go.

Danny Cox, of Hargraves Lansdown, says: "When it comes to saving for retirement, a pension is almost always the number one choice, especially if you are in a company pension scheme, as your employer will also pays in.

"The exception is if you are self employed and a basic rate taxpayer, where a Lifetime Isa works well for retirement savings.

He adds: "Lifetime Isa savers should look to the stock market for long term retirement savings as this will provide a significantly bigger pot in the future than a cash Lifetime Isa.

"The cash Lifetime Isa is only really suitable for those planning to buy property in the short term of more than one but less than five years."

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